Category creation and the importance of product marketing

Category creation for an enterprise software company is the ultimate growth strategy. It’s a tactic that goes beyond innovation and instead focuses on building something different. If you claim to have a better offering than an existing category, your efforts simply reinforce the position of the existing category leader. It’s better to create your own sandbox and establish yourself as the leader, instead of playing within an existing sandbox. I believe the spirit of entrepreneurship and the true drivers of technological and economic progress are rooted in category creation.

A new category often shares roots with another product class, but delivers exponentially better benefits, experiences, and economics, and delivers a distinctive business and profit model. While there is plenty of merit (and profit) in building on and improving existing models, in the long run, data shows that the market exponentially rewards category creation companies, giving them incremental market capitalization for every $1 in revenue growth.

Most enterprise category opportunities are created by the confluence of a number of macro trends that make the incumbents within an existing category redundant. Completely new horizontal opportunities don’t come together often. An example of new category creation is Gainsight, which started developing software for Customer Success Management when SaaS software started to become the dominant model for technology. Prior to this shift, customer success hadn’t been a huge priority, but as cloud adoption grew, we started to see a new organizational function emerge in the form of Customer Success Managers.

Hubspot is another example, which was basically a CRM. When the company was founded, there were many CRM’s out there, including the behemoth, Salesforce. They could have positioned themselves as a CRM that does XYZ in better ways than Salesforce. Instead, they created a new category for Inbound Marketing as a completely different way of engaging with prospective buyers. They write content about the problem and then introduce the new way of generating leads and connecting with prospects via Inbound Marketing.

Eloqua and Marketo were part of the customer behavioral shift that lead to a new way of doing business, where prospective buyers were increasingly investigating products and services online before buying. Their B2B solutions emerged in the Marketing Automation category. Hootsuite and others emerged in the Social Media Marketing category when platforms like Twitter and Facebook started to become popular, and so on.

The purpose of category creation isn’t just about making a dent in the way companies work and changing what people do every day. Category creation is about setting the price. Setting the price is important because price point determines your ACV, and your ACV leads to your valuation. If you’re in an existing market, your ACV is already set.

If you go and build a new project management tool, the price of project management tools is already set, whereas if you create a new category, you can set the market size and the price, and you can move money from one pot of gold to another.

With category creation comes the need to create a concept in people’s heads, define its value, and set the rules of the game. It’s about creating a net new problem and a net new solution to that problem. Category creation it isn’t like any other marketing and branding exercise; you’re not just describing the arc and the narrative, you’re building and selling something entirely different.

The role of IT is shaping category creation

To complicate things, theories about how IT is dying — or the conviction that companies and departments beyond IT will continue to become empowered through software — are still very much in transition. Somehow, we don’t talk about that enough, but it’s connected to the future of enterprise software and category creation.

The line between business functions and IT is blurring. In the future, the majority of software apps will be used by non-IT users and brought in as “SaaS” services. New teams and roles will likely be formed to manage the new technology. Whether IT owns it or it stays on the business side, the new function is likely to own all technology end-to-end.

That means that B2B tech startups need to do everything in two phases: for the now, and for the later, and towards two constituencies — through both direct lines of business and IT. If you can create a new function or a set of roles and responsibilities at a company and change the way companies work on a day-to-day basis, you can create a new market category.

Startups should think about what this means within the context of these two phases. In my mind, Phase 1 focuses on building out the platform that reflects the key aspects of today’s organization. Phase 2 focuses on creating a new definition of how organizations navigate. By the time someone pivots into your space, you’re already offering a service that reflects the present and the future.

Why Product Marketing is so important

With category creation, you are asking customers to bet on something new, where they may feel there is product-market fit or the solution is a proven concept, but you’re potentially asking them to pay a lot of money, which may be risky. Early buyers are visionaries who embrace your vision and narrative. Companies may need to integrate their solutions to other established technologies to facilitate this transition. This is where Product Marketing comes in.

Product Marketing is the lifeblood of a software product company and one of the most critical functions of going to market. The role defines: What’s the box we’re drawing for our customer to buy? What’s in the box? What’s outside of the box?

It helps to define your entire competitive landscape, deconstruct your secret sauce, and position your business for growth.

The Product Marketing role is about three primary things: Positioning, Sales Enablement, and Playbook Development. Mainly, it’s about synthesis.

Positioning: A Product Marketer’s job is to frame the problem, the value, and the tech solution for the customer. It’s about setting the buying requirements such that your differentiation is the thing that the customer will value most.

In a sales cycle, you’re first convincing a prospect of the problem and presenting a mini-narrative of how the way you solve it is unique, better, and different from the competitors. Product Marketers are the people who decompose that narrative. Often, the differentiation is very technical, so Product Marketers need to work closely with the product team as well as customer-facing teams — Sales, Customer Success, Support — to ensure the message is delivered accurately and consistently.

Sales Enablement: Often, enterprise companies are trying to figure out sales. They may hire sales people before marketing, and the sales people are doing the best they can with the assets they have. By the time a marketing person joins the team, each sales person is doing things his or her way. There’s no single point in the company that is able to help translate these things in a way that can be scaled in the field.

How do you teach 1, 10, or 50 sales people how to sell what’s unique about you? Where do you start?

An initial tactic is to take your first 10–20 customers and bring them into a customer advisory board. Get their feedback and turn it into materials and tools that your salespeople can help sell your solutions — case studies, solution briefs, etc. Bring prospects into those meetings to listen to your customers. There is nothing more valuable than customers sharing their use cases and pain points to your team and to prospects. Without this function, you’re not going to be able to scale successfully over time or into multi-year deals unless and until you know which personas to target, and are able to build content out from your core positioning.

The goal with sales enablement is to train sales and pre-sales members to execute like a machine. If you get good at it, you can set landmines for your competitors by enabling the buyer to organically come to the conclusion that your solution is obviously better.

Playbook Development: Over time, as you gain feedback on your positioning and sales enablement, you can start to create a set of scalable, repeatable plays that reflect the pain points and personas in the organizations you’re targeting and turn those into a selling motion that ends in a sale. You’re looking for patterns and algorithms that can help turn the sales pipeline into an if/then logic formula.

A component to this is paying attention to real market signals to determine whether you have product-market fit and are positioned to scale. One indicator that you’ve reached repeatable scale is when you don’t need your CEO in every sales meeting to win the deal, and a deal can be closed by a non-expert.

Another component is being open to being wrong about your playbook and hypotheses. Deal analyses and post-mortems for wins and losses can help you refine your messaging and strategy.

Product Marketing is important even if you aren’t creating a new category

From my experience, Product Marketing is one of the most misunderstood roles on a product team. On many teams, it’s simply missing until the sales team grows exponentially and needs content, but the demand generation members may not have the technical expertise to draft effective sales enablement assets.

This is due to a few primary reasons. First, tech teams often believe they know their market, their target users’ pain points, and believe the value of the solution they’re offering will be obvious. They may be missing key market opportunities because they are building based off of assumptions and/or limited market and user feedback.

They either may not value marketing, or their knowledge of marketing is limited. As a result, their first marketing hire is someone who doesn’t have a solid understanding of Product Marketing as a discipline. They may be focused on bringing leads into the funnel (lead gen, PR, digital), but they may not be able to help close the deal because a core understanding of their target market and a key aspect of their technical messaging is missing.

Start with the Product Marketing role and build out other disciplines from there — demand generation, digital strategy, content, PR. If you don’t have your core positioning down, these other program functions will be less impactful. A seasoned Product Marketer can actually help a Product team build the right product because they’re working directly with the market and with customers.

Second, because the role needs to be highly collaborative with Product/UX, Customer Success, and Sales roles, the Product Marketing role often needs to be a change agent within an organization. Depending on the team, achieving stakeholder buy-in and establishing a cross-functional cadence can take time. For this reason, it’s a role that cannot easily be outsourced.

Third, unless you’re a large, growth-stage company with established teams and marketing disciplines, Product Marketers tend to assume other marketing functions in addition to the technical: creating content for all stages of the customer funnel, devising go-to-market strategy, managing campaigns and marketing operations, supporting field events and partner marketing efforts, and so on. Often, Product Marketers wear all of the hats; it’s often a considerably demanding role, but one that can deliver significant impact for your business.

Wrapping it up

In enterprise software, you have two primary objectives: create a concept and plant it. If people wake up in the morning and aren’t thinking about your thing, you probably haven’t created a category. If you cannot establish yourself as a category leader, someone else will and they will eat your market.

Getting others to think about your thing and see its value so that it’s important is key to category creation. Companies are looking to you for thought leadership and narrative. Investing in Product Marketing is essential, not only for category creation. It’s also necessary to find key market opportunities, establish product-market fit, position your solution so that customers can understand it within context, and build a scalable, repeatable framework for growth.